On Tuesday, Alta Equipment Group (NYSE: NYSE:ALTG) had its price target lowered by DA Davidson from $20.00 to $12.00, though the firm maintained a Buy rating on the stock. The adjustment follows the company's second-quarter results of 2024, which prompted a review and subsequent alteration of the adjusted EBITDA forecasts for 2024 and 2025.
The revised outlook is due to anticipated challenges in the demand and pricing for new and used equipment within the Construction Equipment (CE) sector, as well as a reduction in large machine purchases in the Material Handling (MH) division. Despite these headwinds, the demand for MH remains strong. The core performance of CE is expected to stay weak, with customers likely to postpone purchases and channel inventories being adjusted.
DA Davidson notes that the product support revenue and margins are healthy, which should contribute positively as the fleet ages and demand continues to be robust. However, the firm emphasizes that Alta Equipment Group should prioritize de-leveraging, even though the current net leverage is considered manageable.
Alta reported an increase in revenues to $488.1 million and a rise in adjusted EBITDA to $50.3 million during its Second Quarter 2024 Earnings Conference Call. Despite facing challenges in the Construction Equipment segment and broader market uncertainties, the company has seen profitable growth in its Material Handling segment and record revenues in product support. Additionally, Alta has announced a partnership with Harbinger, marking its entry into the medium duty electric truck market.
The company has faced some headwinds but remains optimistic about growth opportunities, forecasting an adjusted EBITDA of $190 to $200 million for the full year. Despite a decline in the North American lift truck market, Alta has managed to increase its market share.
However, the company has also noted a decrease in sales and margins in the Construction Equipment segment and lower gross margins and volumes due to equipment oversupply.
InvestingPro Insights
Following the price target adjustment by DA Davidson, current metrics from InvestingPro show a challenging landscape for Alta Equipment Group (NYSE:ALTG). With a market capitalization of $190.28 million, the company trades at a negative P/E ratio of -8.78, indicating that investors are anticipating lower earnings or potentially losses. This aligns with an InvestingPro Tip that analysts do not expect the company to be profitable this year. Additionally, the company's stock has experienced significant volatility, as highlighted by another InvestingPro Tip which notes that the stock is trading near its 52-week low and has taken a substantial hit over the last week, month, and six months, with the price total return reaching -59.58% over the last year.
Despite these bearish signals, the company's revenue grew by 11.3% over the last twelve months as of Q2 2024, which may provide a silver lining for investors looking for growth potential in the company's operations. Moreover, the dividend yield stands at a notable 3.97%, potentially offering a cushion for income-focused investors in the face of price declines.
For a deeper analysis and additional InvestingPro Tips on Alta Equipment Group, investors can explore further on InvestingPro. There are currently 12 additional tips listed, which could provide a broader understanding of the company's financial health and market position.
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